GOODS AND SERVICE TAX IN INDIA

INTRODUCTION

In India we have two types of taxes, direct tax and indirect tax. Indirect taxes are the major sources of tax revenue for Indian government. Indirect tax include Goods and Service Tax (GST), which is introduced in India on 1st July 2017 by the Indian Prime Minister Narendra Modi. GST extend to whole of India including the State of Jammu and Kashmir.
GST is a value added tax levied on manufacture, sale and consumption of goods and services. Since only on value added at each stage is taxed, there is no tax on tax or double taxation under GST.

FRAMEWORK OF GST

India has adopted a dual GST, imposed by center and state. GST has three categories:

1. CGST (Central Goods and Service Tax): CGST is imposed on manufacturing, sale and consumption of goods and services taking place within the the sate. CGST goes to central government.

2. SGST (State Goods and Service Tax): SGST is imposed on manufacturing, sale and consumption of goods and services which is taking place within the state. SGST goes to the state government.

3. IGST (Integrated Goods and Service Tax): IGST is imposed on manufacturing, sale and consumption of goods and services taking place between the state i.e. interstate transaction. IGST goes to the central government.

RATES OF GST

GST Council has provided four slabs for tax under GST. GST rates range from 5% to 28% in four bracket structure at 5%, 12%, 18% and 28% for different items and services. To keep inflation in check, essential items including food,which at present constitute roughly half of the consumer inflation basket, will be taxed at a zero rate. The lowest rate of 5% would apply to the common use items like spices, edible oil, sand etc. Processed foods attract a rate of 12%. Major manufactured goods like soap, oil, toothpast, refrigerator, smartphones etc. attract 18%. The peak rate of 28% will apply to luxury goods.

CONCLUSION

India is oozing potential. With each passing year, the correlation between Indian economy with World economy is getting strengthened. GST will improve the ease of doing business,enhance investment, reduce the logistics costs. It will add about two percent to the GDP. GST will be remembered as the biggest indirect taxation reform in the history of Indian economy since 1991.